Xie Company identified the following activities costs and ac

Xie Company identified the following activities, costs, and activity drivers for 2017. The company manufactures two types of go-karts: Deluxe and Basic. Activity Expected Costs Expected Activity Handling materials $ 625,000 100,000 parts Inspecting product 900,000 1,500 batches Processing purchase orders 105,000 700 orders Paying suppliers 175,000 500 invoices Insuring the factory 300,000 40,000 square feet Designing packaging 75,000 2 models Required: 1. Compute a single plantwide overhead rate, assuming that the company assigns overhead based on 125,000 budgeted direct labor hours. 2. In January 2017, the Deluxe model required 2,500 direct labor hours and the basic model required 6,000 direct labor hours. Assign overhead costs to each model using the single plantwide overhead rate.

Compute a single plantwide overhead rate, assuming that the company assigns overhead based on 125,000 budgeted direct labor hours.

In January 2017, the Deluxe model required 2,500 direct labor hours and the basic model required 6,000 direct labor hours. Assign overhead costs to each model using the single plantwide overhead rate. (Round \"OH cost\" answers to 2 decimal places.)

Solution

Computation of single plantwide overhead rate

Single plantwide overhead rate = Total Overhead / Budgeted Direct Labor Hours

Single plantwide overhead rate = ($625000 + $900000 + $105000 + $175000 + $300000 + $75000) / 125000

Single plantwide overhead rate = $17.44 Per hour

2. Overhead Cost of Deluxe and Baisc Models

Deluxe Model = Hours Required * OH Rate = 2500 * $17.44 = $43600.00

Basic Model = Hours Required * OH Rate = 6000 * $17.44 = $104640.00